Healey’s Budget Headroom Halved as Borrowing Costs Climb
John Healey’s headroom against his fiscal target has been halved from £24 billion to £12 billion by higher borrowing costs, the Resolution Foundation estimates, eleven days before his first Budget on 28 October. The Chancellor insisted that “my Budget will protect Britain’s resilience through this turbulent time”, as conflict in the Middle East and Ukraine pushes up energy prices and the cost of government debt.
Debt interest spending is set to run around £14 billion above the OBR’s forecast in 2029-30, and household energy bills are expected to rise to around £2,000 from January. The think tank urges Healey to rebuild headroom to at least £20 billion by raising around £8 billion in tax, for example by ending Capital Gains Tax exemptions on death, lowering the VAT registration threshold and charging National Insurance on partnership income. It also proposes a £2 billion temporary energy discount, worth £175 on average, for households where no one earns above £24,000. The Chancellor must balance the Iran war, defence demands and the cost of living.